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Real Estate Financial Modeling Accelerator (Updated October 2024)

Prior to launching the Accelerator program, Michael and I fielded email after email requesting a more structured real estate financial modeling training program on the site. Over the years, we've covered hundreds of real estate modeling…

Design Architect

Design architect role is to create the design concepts of a building within the parameters created by the site, environment, budget and other factors. While they create the vision and refine the project down to specificity, the design architect…

Easement

An easement gives an individual or entity the legal right to use or access the property owned by some other individual or entity. Common instances for easements grant public access for roads or access to utility companies to install or maintain…

Discounted Cash Flow

An investment analysis tool used regularly by real estate professionals to make buy, sell, hold, and development investment decisions. The discounted cash flow (DCF) is a process by which the real estate professional forecasts the future cash…

Development Spread

The difference, denoted in basis points, between the market cap rate and the yield-on-cost . The Development Spread measures the "development pop", or value-added by taking on the construction and lease-up risk. The greater the development spread,…

Draw

A periodic disbursement from the lender to the borrower from the construction loan proceeds to cover costs incurred during the development process. Common costs include materials, contractors or subcontractors, or any other vendor invoices in…

Discount Rate

In commercial real estate, the discount rate represents the rate of return used to convert future cash flows into their present value. It reflects the risk and opportunity cost associated with a particular investment. Typically used in discounted…

Direct Capitalization

A valuation method common to real estate where the value of an income-producing property is calculated by taking its stabilized net operating income and divided that by a market capitalization rate. Direct Capitalization (or "direct cap") analysis…

Delaware Statutory Trust

A distinct legal entity used by real estate investors seeking to defer their capital gains taxes through the use of a 1031 tax-deferred exchange. The primary advantage of the DST is that it allows multiple investors, particularly those with…

Deed

A legal written document that transfers possession of real property from one entity to another. Deeds are recorded at time of sale and when purchasing real estate, it is important to have a title search done where, among other things, a title…

Deed of Trust

A Deed of Trust is an agreement between a lender (mortgagee) and borrower (mortgagor) whereby the mortgaged property is conveyed to a third neutral party, usually a title company, to be used as collateral while there is an outstanding mortgage.…

Deed in Lieu of Foreclosure

The voluntary transfer of a title deed by the borrower to the lender in order to satisfy a defaulting loan (thereby avoiding foreclosure proceedings). Also referred to as "giving back the keys" or Jingle Mail. Putting 'Deed in Lieu of Foreclosure'…

Defeasance

The process of releasing a borrower from its debt obligation (mortgage loan) and substituting the lien on the property with acceptable replacement collateral (typically treasury bonds). This replacement collateral is expected to generate a comparable…

Debt Yield

The ratio of Net Operating Income (NOI) to the mortgage loan amount, expressed as a percentage. The debt yield is useful to lenders as it represents the lender's return on cost were it to take ownership of the property. Among other metrics,…

Debt Service Coverage Ratio

A financial metric used in real estate to measure a property’s ability to cover its debt obligations. The Debt Service Coverage Ratio (DSCR or DSC) is calculated by dividing the net operating income by the debt service payment and is often…

Debt Covenants

Debt covenants are essentially rules written into the loan documents which govern the behavior of a borrower once the debt is issued. There are 2 general types of covenants which either permit (affirmative covenant) or restrict (negative covenant)…